Social media is transforming nearly every industry, including financial services. It is a broad term that captures all types of content, from short and sweet tweets, to lengthy and detailed commentaries.
While investors have been using social media (think: Yahoo! Message Boards) as a part of the decision process for years, the prospects of better social media analytics and automating their incorporation into trading come at a time when there is an explosion in quantity and types of data, with the likelihood of even bigger possibilities.
[For more on the potential power of social media analytics in financial services and some of the available solutions, see TABB Group’s latest report, “Social Alpha: Channeling the Chatter.” Please contact TABB Group for details.]
In the analysis process, the first question is: What content should be included? Some analysis techniques include the links embedded in tweets, which could lead to any number of secondary sources of content. Once the data has been scrubbed and filtered, the most common type of analysis is sentiment. The most basic form of sentiment analysis is polarity – a negative or positive sentiment. Richer sentiment analysis can include a wide range of emotions, such as frustration, fear or joy. An even more elaborate analysis can go beyond emotions to describe broader macroeconomic themes and concepts, such as social unrest and violence.